Phillips Edison & Company, Inc. and Phillips Edison Grocery Center REIT II, Inc.
On July 18, 2018, Philips Edison & Company, Inc. (PECO) and Phillips Edison Grocery Center REIT II, Inc. (PECO II) announced that PECO and PECO II had entered into a merger agreement in which PECO will merge with PECO II in an all-stock transaction. The exchange of stock is 2.04 shares of PECO common stock for 1 share of PECO II common stock, which based on PECO’s estimated NAV per share of $11.05 implies a price of $22.54 for each PECO II share. PECO II reported an estimated value per share of $22.80, as of March 31, 2018. PECO shareholders would own approximately 71% of the combined entity post-merger. PECO anticipates distributions would remain at approximately 6.1% of estimated NAV post-merger. The transaction is expected to close during the fourth quarter of 2018 and includes a go-shop period of 30 days. The merger is subject to the approval of PECO and PECO II shareholders.
American Finance Trust, Inc.
On July 19, 2018, American Finance Trust, Inc. (AFIN) announced the reinstatement of its amended and restated distribution reinvestment plan (DRIP). The reinstatement of the DRIP will become effective upon the listing of AFIN’s Class A common stock on the NASDAQ Global Select Market, which occurred on July 19, 2018, under the ticker symbol “AFIN.” Shares issued under the DRIP will be issued at the average of the high and low trade prices of the Class A common stock on the date of reinvestment.
Additionally, AFIN’s board of directors (the Board) announced, on the recommendation of its compensation committee and FTI Consulting Inc. (FTI, AFIN’s compensation consultant), a new director compensation package. The new compensation package will grant each Board member a number of restricted shares of Class A common stock equal to $340,000 divided by the average of the closing price of the Company’s Class A common stock from August 20 through August 30, 2018. Such shares will vest over a three-year period. Additional compensation includes a $60,000 cash retainer for independent directors along with an annual $85,000 grant of restricted Class A common stock.
AFIN’s operating partnership (OP) also entered into a listing note (the Listing Note) with the special limited partner (an affiliate of the Advisor). Under the Listing Note the OP will distribute to the special limited partner 15.0% of the difference (if a positive number) of the market value of AFIN’s Class A common stock plus distributions less the sum of the gross proceeds of all offerings of common stock, including issuance of stock to facilitate the merger with American Realty Capital Retail Centers of America, plus the total amount of cash that would be required to provide stockholders with a 6.0% cumulative, non-compounded return on gross proceeds.
The calculation of the market value of AFIN’s Class A common stock is based on the average closing price of AFIN’s Class A common stock over a thirty-day period beginning 180 days after the conversion of the Class B-2 common stock into Class A common stock. Class B-2 common stock will convert into Class A common stock 180 days after the listing on July 18, 2018. The Listing Note is subordinated to credit obligations of AFIN.
Additionally, on July 19, 2018, AFIN adopted a multi-year outperformance award, at the recommendation of the Board’s compensation committee and FTI, which will provide the Advisor with certain equity-based compensation upon the achievement of certain total stockholder returns and upon total stockholder returns compared with that of a peer group. Total equity compensation would be capped at $72 million divided by the average closing price of the Class A common stock over a 10-day trading period from August 20 to August 30, 2018. The performance compensation would be based on two measures: half of the prospective compensation would be determined from hurdles based on the absolute total stockholder return for AFIN’s Class A common stockholders and half would be based on the total stockholder returns compared with the total stockholder returns of a peer group consisting of Colony Capital, Inc., Lexington Realty Trust, Ramco-Gershenson Properties Trust, Select Income REIT, and Spirit Realty Capital, Inc. Note that the peer compensation hurdles allow for the Advisor to receive compensation even if the total stockholder returns of AFIN stockholders is below the performance of its peer group.
Additionally, the listing constitutes a liquidity event under the limited partnership agreement, and approximately 1 million units of limited partnership interests, held by the Advisor, will be converted into Class A common stock.
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Hines Real Estate Investment Trust, Inc.
On July 9, 2018, Hines Real Estate Investment Trust, Inc. approved a final liquidating distribution of $0.08 per share anticipated on or around July 31, 2018. This constitutes the last distribution under a plan of liquidation and dissolution adopted by shareholders on November 7, 2016.
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